Long Term Care - The Looming Crisis

The pig is nearing the end of the python: The giant bulge in the population known as the baby boom (born between 1946 and 1964) is approaching the end of its generational life. Some baby boomers are eligible for early retirement now, and the rest will be pushing Social Security and Medicare toward insolvency soon. The aging boomers will place an even greater strain on the nation’s long term care system.
Long term care is a range of supportive services required by individuals who lack the ability to care for themselves over an extended period. The number of people needing long term care will rise dramatically in the coming decades. Today the elderly—those people 65 years old and older—make up 12 percent of the population. By 2025, the elderly will make up 20 percent. In addition, the number of the super-elderly—age 85 and older—will increase ten-fold to more than 14 million by 2035.
Nearly 70 percent of Americans who live to be 65 require long term care at some point, according to the American Association of Homes and Services for the Aging. This care is expensive. Today, a private room in a nursing home costs about $75,000 per year.
Contrary to popular belief, long term care is not covered by Medicare, the taxpayer-financed medical program for senior citizens. Long term care is paid for in three ways: out of pocket by individuals, by private long term care insurance, or by Medicaid. Right now Americans spend about $200 billion a year on long term care. Fifty-one percent is paid by private sources; 49 percent is paid by Medicaid.
To qualify for Medicaid, individuals must have little income and few assets. The family home does not count as an asset, provided a spouse or dependent lives in it. The home’s equity does count toward eligibility, however. The 2005 Deficit Reduction Act made seniors with home equity above $750,000 ineligible for Medicaid. In addition, the “look-back” period for transferring ownership of a home (to become eligible for Medicaid and to protect it from Medicaid reimbursement) was increased from 36 months to 60 months.
The simplest solution for families that want to protect their assets and pass them on to their heirs is to take out long term care insurance. For a monthly premium, the insurance company agrees to pay for your long term care, should you ever need it. The federal government’s Health Savings Account (HSA) program has been expanded to include long term care insurance premiums. With an HSA, you can pay for long term care insurance using pre-tax dollars. By eliminating FICA and income tax withholding from the HSA dollars, the savings plan increases your insurance buying power.
Congress realizes that taxpayers will resist paying for the historically high number of people who will need long term care. Some in Congress have proposed making long term care insurance premiums tax-deductible as an incentive for individuals to pay for long term care privately. Long term care insurance offers the best solution for the coming crisis in long term care.

A frequent contributor to online and print publications, Bradley Steffens is the author of twenty nonfiction books for children and young adults and coauthor of seven more. His newest book, Ibn al-Haytham: First Scientist, is the first biography to be published in English about the medieval Arab scholar known in the West as Alhazen.